Credit Suisse downgrades Pearson on limited visibility

Credit Suisse downgraded Pearson to ‘neutral’ from ‘outperform’ and slashed the price target to 970p from 1,455p following the company’s third-quarter trading update last week.

It said the update showed weak underlying revenue and the general message was one of a strong competitive performance more than offset by industry-wide struggles.

“Whilst we continue to see the potential for longer-term upside for the group as it makes the digital migration, we believe these results demonstrate that it is no longer possible to have any meaningful conviction in the group's short-medium term trading and as such we no longer believe its assets deserve a premium to its more stable professional publishing peers.”

The bank cut its 2015 and 2016 adjusted earnings per share estimates by 6.3% and 14.3%, respectively, as it takes more conservative assumptions for the group given the lack of clarity.

This takes CS’s 2015 forecast adjusted EPS to 70p, in-line with company guidance for "around the bottom end" of the group's 70-75p range.

At 1040 BST, Pearson shares were down 1.1% at 895.50p.